It’s surprising to me how many people ask this question when I speak with them. I don’t know if there are other websites out there that are giving bad information, or whether the credit bulletin boards and chat rooms are providing false information, but people are simply making incorrect assumptions. Credit Card companies, Collection Agencies and Junk Debt Buyers absolutely can sue you. It is perfectly legal and it happens every single day. The real issue is, can they prove a case against you? The answer to that question is often a giant NO!
For business reasons, many credit card companies sell delinquent accounts after a charge-off occurs. (A charge-off is an accounting term whereby the credit card company lists the account as delinquent and uncollectible on its books). Charge-offs typically occur about 6 months after a default occurs. Many people mistakenly believe that a charge off means that they don’t owe the debt any more, but that belief is entirely false. All that it means is that the creditor has some delinquent debt and they are notifying government agencies of that fact.
I believe the basis of the incorrect assumption that a Collection Agency cannot sue you comes from the fact that you never had a credit account with them. While this is true, what you have to understand is that the original credit card company did have the right to sue you once you defaulted on the credit card account.
The right to file a lawsuit is a legal interest. Any legal interest can be sold. For example, let’s say that Joe is injured in an auto accident by a drunk driver. Let’s assume that Joe needs some money to pay this month’s rent. Joe can sell his right to file a personal injury claim to me for whatever amount that we agree upon. I then obtain the right to sue the drunk driver.
It works the exact same way with collection agencies. Once you default on an account, the original credit card company gains the right to sue you. For business reasons, many credit card companies simply charge-off the debt and sell the legal interest in your defaulted account to a collection agency. The collection agency then has the option of filing a lawsuit against you.
Let’s go back to the Joe example above, though. Imagine how difficult it would be for me to prevail in a lawsuit against the drunk driver, especially if Joe does not testify as a witness at the hearing. It would be very difficult, if not impossible, to prevail in court. The same thing applies to collection agency and junk debt buyer lawsuits. The collectors have trouble prevailing in court, at least when you have a competent consumer attorney defending you, because they often lack the proper documentation and witnesses to prove the case against you.
If you have a credit card company or a collection agency attempting to collect a debt from you, please contact my office at 412-823-8003 or send an email to Attorney Greg Artim